Sharp as a tack – and by god he’ll need to be

The process of appointing the next governor of the Bank of England was proclaimed as the most open and transparent ever – it was even the first time the post had been advertised.

But when it came to choosing the person to do the most important non-elected job in Britain – keeping the economic and financial system honest and stable – Downing Street was leaving nothing to chance.

George Osborne set himself the private task of getting the man he considered best for the job.

Surprise package: Canadian Mark Carney has been chosen as the new governor of the Bank of England. He will now switch to the UK having done the same job in Canada

Having first approached Mark Carney, governor of the Bank of Canada, at the Mexico G20 summit in February, the Chancellor pursued him at every subsequent financial gathering. And he eventually landed his man in Tokyo on the fringes of the annual meeting of the International Monetary Fund a month ago.

Mr Osborne is acutely aware that the City of London is the largest financial centre in the world and yet the reputation of Britain’s banking system has never been lower.

A series of scandals, ranging from the rigging of the Libor interest rates at Barclays to money-laundering of drug and terror funds at HSBC and Standard Chartered, have left its standing in tatters.

Personal effort: George Osborne set himself the private task of getting the man he considered best for the job

Mr Osborne regarded it as essential that the next governor came with an absolutely clean record and real expertise.

As chair of the Financial Stability Board, the global body setting the rules for the leading economies, Mr Carney was seen by the Chancellor and the interview panel at the Treasury as the outstanding candidate.

When I saw Mr Carney in action in Tokyo at the IMF meeting he rattled off a check-list of reforms for the global financial system from cleaning up the Libor market to making sure banks adopted the most rigorous capital standards to protect balance sheets.

He went even further, suggesting it was also time that two other markets capable of being abused by ruthless speculators – those for oil and gold – were also reformed. His style is crisp, concise and business-like and the only slightly muffled answer came when I asked him if he was a candidate for the London post.

The British way: Mr Carney is no stranger to our shores, having lived here for a decade and he has a British wife and children

It is unprecedented for the sitting governor of a central bank from one advanced country to be poached for the same post by another.

The Chancellor was encouraged in his belief that it could be done by the fact that Mr Carney is a native of Canada – a Commonwealth country – and the appointments of both the governor of the Bank of England and that of the Bank of Canada are made in the name of the Queen.

Mr Carney is also no stranger to our shores, having lived here for a decade – he obtained his PhD in economics from Oxford and has a British wife and children.

But the greatest factor in favour of this 47-year-old son of a high school teacher is the way that Canada sailed through the great financial panic under his guidance from 2007 onwards without having to bail out or recapitalise its banks.

Like other central banks around the world Mr Carney did make an emergency loan facility available in the wake of the collapse of Lehman, but it was a temporary measure and paid back relatively quickly.

Such is his international reputation that Time magazine named him one of the most influential policy makers in the world, saying: ‘Central bankers aren’t often young, good looking and charming, but Mark Carney is all three – not to mention wicked smart’.

Eyebrows are certain to be raised, however, at the fact that his practical banking experience was obtained at Goldman Sachs, which is regarded by critics as the source of all that is wrong with casino banking from its egregiously overpaid partners to its capacity to be on two sides of the same deal. In this regard Mr Carney finds himself part of one of the most high powered – some might say toxic – old boy networks in the world.

The governor of the European Central Bank, Italy’s Mario Draghi, is also a former Goldman Sachs insider. The same can be said for Bill Dudley, the top figure at the Federal Reserve Bank of New York.

High praise: Chancellor George Osborne said Carney was 'quite simply the best, the most experienced and most qualified person in the world to be the next governor of the Bank of England'

Another Goldman Sachs old boy, Hank Paulson, the former Treasury Secretary, was responsible for helping to stitch the US banking system back together in the wake of the Lehman fiasco.

The scale of the job facing Mr Carney is enormous. The independent Bank of England as established by Gordon Brown in 1997, was to be a narrow, monetary and interest-rate-setting body. The financial crisis of 2007-08 and recession that followed changed all of that.

The job has expanded exponentially with the creation of a financial policy committee, headed by the beaten favourite for governor’s post Paul Tucker, and the new Prudential Regulatory Authority responsible for policing the most significant financial institutions in London.

The borrowings on the balance sheets of London-based banks are four times the size of the country’s total output – giving an indication of the size of the task that lies ahead. Indeed, it was the sheer scale of the challenge that finally persuaded Mr Carney that it was worth doing.

Having also helped to guide Canada through the great recession of 2009-10, without serious disruption to growth and jobs, he faces the task of steering UK monetary policy.

It is a much more complicated task over here, in that Britain does not have the minerals, natural resources, shale oil and wheat fields to support its industrial base.

The most tricky task Mr Carney will face on monetary policy will be to decide when artificially low interest rates, currently held at 0.5 per cent, have to be normalised and raised – a decision that will affect every UK household, whether borrowers or savers.

This will be made even more complicated by the fact the Bank of England carries on its balance sheet £375billion of government stock bought for cash as part of the quantitative easing programme.

One thing Mr Carney should be able to do as a total outsider, with no connection to the flummery that still exists around the Bank, is to bring it into the 21st century.

The pink-coated waiters, who guard the corridors and act as messengers, might be acceptable if the Bank were a tourist attraction like the Tower of London rather than the core institution in the City.

Similarly, the insistence that the Bank has a ‘Court’ rather than a board of non-executive directors needs reforming.

A no-nonsense figure, Mr Carney is unlikely to be seen in the royal box at Wimbledon – as his predecessor Sir Mervyn King was – at a time when the financial world is still in turmoil.

The likely break-up of the eurozone will be by far the biggest threat to Britain’s economic stability, and one that the Canadian needs to steel himself for in all its fury.

He may argue he has already been through something similar, given that Canada was the closest neighbour to the US – and Wall Street – when Lehman failed.

But dealing with the quarrelsome and mercurial Europeans could prove more daunting than Washington, where people say what they think – and very publicly.